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Trustor vs. Trustee: What’s the Difference?

Byline profile imageWritten by Ben Geier, CEPF®
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Byline profile imageEdited by Marie White, CEPF®
Updated on
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Trusts are a useful tool for financial and estate planning, allowing a family to set assets aside to be passed on when someone dies. Some of the language around trusts, though, can be confusing. For instance, while they sound extremely similar, trustor and trustee aren’t quite interchangeable. Though they can certainly be the same person, this isn’t always the case.The trustor is the person who forms a trust, while the trustee is the one who manages its assets. 

A financial advisor can help you form a trust, or answer other questions you have about estate planning or investments. 

What Is a Trustor?

The trustor is the person who creates a trust. The trustor can be a single person, a married couple or, in some cases, a corporation or organization. Trustors often set up the trust as part of an estate plan, with the purpose of passing on assets to their children or other family members through the trust. . However, beneficiaries don’t have to be related to the trustor.

The term “trustor” is sometimes interchangeable with grantor and settlor. Generally speaking, they will not only form the trust, but fill it with assets. This could simply mean money or assets like investment portfolios. Trusts can also be used to hold physical assets, like land, homes, vehicles or personal property, such as jewelry, art and family heirlooms.

What Is a Trustee?

While the trustor is the person who forms a trust and puts assets into it, the trustee is the person who’s responsible for managing the trust. The trustee can be the same person as the trustor, which is often the case with a living trust. This is when someone sets up a trust while they’re still alive for the purpose of eventually passing on assets to their children or other relatives after the trustor dies. While still living, the trustor may also serve as the trustee, but they would have to name someone else to be the trustee upon their death for the purpose of actually distributing the property within the trust.

The trustee is often a trustworthy relative or friend of the trustor. While they don’t have to have legal experience, it certainly can’t hurt if they have a general knowledge of how trusts and estates work.

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Trustor vs. Trustee: Responsibilities and Decision Points

A couple discussing the differences between a trustor vs. trustee with their advisor.

The trustor’s role is primarily front-loaded. The trustor creates the trust, decides which assets to place into it, and sets the terms that govern how those assets are managed and distributed. Once the trust is established, the trustor’s authority may be limited, especially in the case of an irrevocable trust. At that point, control shifts from decision-making to enforcement of the rules already in place.

The trustee’s role is ongoing and operational. A trustee manages trust assets according to the trust document, handles distributions to beneficiaries and maintains records. This may also include filing tax returns for the trust, paying expenses and responding to beneficiary requests. Unlike the trustor, the trustee cannot change the trust’s terms unless the document explicitly allows it.

A key distinction between the two roles is fiduciary responsibility. Trustees owe a legal duty to act in the best interests of the beneficiaries. This includes managing assets prudently, avoiding conflicts of interest and treating beneficiaries impartially. Failure to meet these obligations can expose a trustee to personal liability, even if the trustee is a family member or close friend.

In some situations, the trustor and trustee can be the same person, such as with a revocable living trust. This structure allows the trustor to retain day-to-day control. However, a successor trustee must be named to step in after the trustor’s death or incapacity. The choice of successor trustee often has a direct impact on how smoothly assets are administered and distributed.

There are also cases where separating the roles makes more sense. Irrevocable trusts, creditor-protection strategies and situations involving potential family conflict often call for an independent trustee. Naming a neutral party or professional trustee can reduce disputes, add oversight, and help keep the trust administered according to its stated terms rather than personal dynamics.

Types of Trusts

There are a number of different types of trusts, each of which has their own pros and cons. The two most common types of trusts are:

  • Revocable trust: Sometimes called a revocable living trust, it’s one where you can dissolve the trust or take some assets out of it while you’re alive. In this case, you might be both the trustor and the trustee while you are alive. The ability to make changes here is key. For instance, if you have an asset you think you want to leave to someone upon your death but later decide to sell it, for instance, you can easily remove it from a revocable trust.
  • Irrevocable trust: As its name implies, irrevocable trusts are quite rigid. It is indivisible and you can remove assets from it. This is useful for protecting assets from creditors, but it does mean that you have to be completely sure it’s what you want prior to creating it.

There are a number of other types of special trusts available for use, including marital trusts, bypass trusts, generation-skipping trusts, charitable trusts, special needs trusts and spendthrift trusts. Each of these types of trusts have their own specific use, but a trustor and trustee still create and manage them, respectively.

Bottom Line

An advisor and estate planner.

A trustor is any person who forms a trust, regardless of the type of trust it is. A trustee, on the other hand, is the person who manages the trust. In some cases these will be the same person, but not always. In the case of a living trust, the trustor may be the trustee as well until they die, at which point someone else will become the trustee. If you’ve got an especially complex estate speaking with a financial advisor or estate planning attorney could help you organize a plan for your beneficiaries.

Estate Planning Tips

  • For help with trusts or any other estate planning issues, consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool connects you with financial advisors in your area in five minutes. Get started now.
  • Another thing not to forget when estate planning is to name a guardian for your minor children in your will. Make sure you have a plan for their care, so that in the worst case scenario your family is at least able to execute your plan for them swiftly.
  • Make sure you know the estate tax laws for your state. This could impact how you go about planning your estate and what exactly goes into a trust.

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